Green v Brown

7 In this respect, McLelland CJ in Eq stated that: At the commencement of the hearing counsel for Charlie Brown indicated that no claim for relief was to be pursued based on the Trade Practices Act 1974 or the Fair Trading Act 1987. Consequently, it is no longer necessary to consider the question of Charlie Brown's entitlement to the relief claimed in sub-paragraphs (i), (iiiA) or (iiiB) of paragraph 25 of the amended statement of claim of 7 December in proceedings 4074/94. 8 His Honour, therefore, made consequential orders on 3 July 1995 that the claims for relief in subparagraphs (i) - (iiiB) of par 25 of the amended statement of claim be dismissed, and that Charlie Brown and Ms Brown pay the costs of the defendant in that proceeding. (No orders were made in relation to claims for relief in subparagraphs (iv) - (x), which included damages, an account of profits, and equitable compensation).

9 In relation to the claims by Ecroblack, McLelland CJ in Eq decided in its favour in relation to the construction of the partnership agreement. His Honour noted that there were serious difficulties in interpreting the agreement, but found that it was clause 11, and not clause 13, which governed the dissolution of the partnership. His Honour, therefore, declared that the partnership was dissolved by Ecroblack's notice on 27 September 1994, that clause 13 had no application to the dissolution, and that the partnership be wound up.

10 On 7 July 1995 Ms Brown commenced proceedings under s 275 of the 1991 Act by the filing of a summons. The summons was later amended in September 1995 when Charlie Brown was added as an applicant, Mr Green and Ecroblack were added as respondents and the relief sought was varied to include reference to a deed of partnership of 22 March 1993 between Charlie Brown and Ecroblack.

11 The relief sought in the amended summons was as follows: 1. An order declaring wholly or partly void, or varying, either from their commencement or from some other time, the contracts or arrangements under which the first applicant ('Charlotte Brown') performed work and all related conditions and collateral arrangements and in particular: a. the consultancy agreement between: i. Charlotte Brown, and ii. the second respondent ('Image Clothing'), pursuant to which Charlotte Brown was retained to design and develop for sale and distribution clothing manufactured by Image Clothing, ('the consultancy agreement'); b. the deed of partnership dated 22 March 1993 made between: i. the third respondent ('Ecroblack'), and ii. the second applicant ('Charlie Brown'), pursuant to which Charlotte Brown, through her company Charlie Brown, went into partnership with the first respondent ('Alan Green') through his company Ecroblack, for the retail sale of clothing manufactured by Image Clothing, ('the partnership agreement'). The consultancy agreement and the partnership agreement are hereafter referred to collectively as the 'employment agreements', except in so far as the employment agreements or any related conditions and collateral arrangements provide for the payment of money to the applicants. 2. In addition, or alternatively to order 1 above, and on the same basis, an order that the respondents reimburse and/or alternatively indemnify the applicants in respect of any and all payments made by the applicants or required to be made by the applicants pursuant to the employment agreements or any related conditions and collateral arrangements, including any legal costs of the respondents which the applicants have or will become liable to pay in connection with any other proceedings between the parties or any one or more of them arising out of their dispute. 3. An order that the respondents pay to the applicants such other moneys in connection with the employment agreements or any related conditions and collateral arrangements as may appear to the Court to be just in the circumstances, including interest. 4. An order that the respondents pay the applicants' costs of and incidental to these proceedings. 5. Such further or other relief and such further and other orders as the Court may deem just in the circumstances.

12 The respondents to the summons (Green, Image and Ecroblack) filed a notice of motion that sought the following: 1. An order permanently staying these proceedings insofar as they relate to any claim for relief arising from the partnership entered into between the Second Applicant and the Third Respondent ('The Partnership'). 2. In addition or in the alternative an order that the Applicants' Amended Summons filed in these proceedings be struck out insofar as it relates to any claim for relief arising from The Partnership. 3. In addition or in the alternative, an order that these proceedings be stayed until the Applicants have paid the respondents' costs in proceedings no 4074 of 1994 and 4136 of 1994 commenced in the Equity Division of the Supreme Court of New South Wales. 4. Costs. 5. Such further or other orders as the Court thinks fit. 13 As Schmidt J observed in her judgment on the motion, given on 6 August 1996, "The application was made essentially on two bases. Firstly res judicata or the principle of estoppel and secondly on the basis that there was no jurisdiction, the partnership agreement not being an agreement under which work was performed in an industry."

14 In relation to the second basis, that is the partnership agreement was not an agreement under which work was performed in an industry, her Honour held that this "jurisdictional question cannot properly be determined at this stage of the proceedings. In my view this is a case where the cautious approach to the early determination of jurisdictional questions adopted by the Full Court in Nagle, is the correct one."

15 In relation to the first basis of estoppel, her Honour said: In this case the applicants initiated proceedings in the Supreme Court, in which the construction of the partnership agreement was raised and declarations and damages were sought, in relation to misrepresentations which were said to have given rise to rights under the TPA and the FTA. The applicants who were represented in those proceedings, decided not to pursue those latter remedies and acquiesced in the claims being dismissed, taking no steps to seek to discontinue that aspect of the proceedings, or to appeal the orders dismissing those claims. These actions have had the result that notwithstanding that the misrepresentation case was not heard in the Supreme Court, those issues are said by the respondents to be unavailable to be litigated in these proceedings. The applicants' argument that on the one hand the Supreme Court proceedings were still alive, but should be discontinued given the dissolution of the partnership, but on the other that the applicants' claim for damages for breach of the TPA and FTA had not been discontinued and hence precluded the estoppel argument, must be rejected having regard to the exhortation of the High Court and other Courts, that it is necessary in cases such as this to focus upon substance rather than form. Notwithstanding this, in one sense the estoppel argument raised here by the respondents is a rather technical one, with only a tenuous connection with the underlying principle that there should be an end to litigation. It was after all conceded by the respondents that whatever the outcome of the Notice of Motion was, some parts of the present application were available to be pressed before this Court. Nevertheless it is alleged by the applicants in this Court, that as a result of certain misrepresentations made by Mr Green, the partnership agreement prepared by Mr Green's solicitor did not reflect the discussions between the parties as to the terms of the agreement, rendering the agreement unfair in such a way as to require a declaration under section 275 avoiding or varying the agreement. The decision of McLelland CJ in Eq dealt with these same allegations of misrepresentation by dismissing the TPA and FTA claims. It must follow, applying the Anshun approach, that the consequence for the applicants must be that they are precluded from litigating those same matters in these proceedings. These circumstances are an example of a situation where the same facts, Mr Green's alleged misrepresentations, gave rise to several causes of action, including relevantly those under the TPA and FTA on the one hand and on the other, rights under section 275 of the Act in these proceedings. The applicants are not entitled to pursue both causes of action. The TPA and FTA claims having been dismissed by McLelland CJ in Eq, the applicants are not now entitled to pursue those same facts under section 275 of the Act. The applicant however argued that its claim under section 275 of the Act in relation to the partnership agreement, was advanced on a second basis, namely that irrespective of the alleged misrepresentation, the agreement, as construed by McLelland CJ in Eq, was harsh, unfair and unconscionable and that the performance of the agreement demonstrated this. Such a claim appears to be of a kind that could only be advanced under section 275 of the Act before this Court. (See The Rochester Communication Group Pty Limited & Ors v Rodney Stephen Adler & Ors , Federal Court of Australia, Beaumont J, Unreported, 3 May 1996). Are the applicants estopped from pursuing that claim, because of the dismissal of the misrepresentation case before McLelland CJ in Eq? This question raises great difficulty. After much reflection, I have concluded that the applicants are not precluded from pursuing this aspect of their case. Approaching the matter on the basis of a consideration of substance rather than form, I accept that the claim that the performance of the partnership deed, absent any allegations of misrepresentation, may be advanced. Such a case does not turn upon allegations of misrepresentation by Mr Green as to the terms of the agreement later entered by he and Ms Brown and thereafter by the two companies. Rather, it is the performance of the partnership agreement, in accordance with its terms which is raised for consideration. What falls to be determined in relation to this aspect of the claim is whether, in the words of Priestley JA in Rothmans Distribution Services Limited -v- Full Court of the Industrial Court of New South Wales (1994) 53 IR 157 at 160, 'a contract which could so operate was unfair' . It follows that this second aspect of the claim is not in conflict with the misrepresentation claims dismissed by McLelland CJ in Eq. The applicants here seek to assert a different right to that raised under the TPA and FTA, which must be supported on a different basis to that upon which the misrepresentation claims depended. This second aspect of the section 275 claim is not an example of a situation where the same facts gave rise to two causes of action between which the applicants are required to make an election. It is the outcome of the operation of the partnership deed which must be considered. In those circumstances, it is not appropriate to stay this second aspect of the applicants' claim. 16 Schmidt J made the following order: The applicants' claim for relief under section 275 of the Act, which arises out of misrepresentation alleged on the part of Mr Green as to the terms of the partnership agreement entered into between the second applicant and the third respondent, is permanently stayed. 17 The effect of her Honour's decision and order was:

1. To permanently stay the claim for relief sought by Ms Brown and Charlie Brown under s 275, which arose out of misrepresentation alleged on the part of Mr Green as to the terms of the partnership agreement between Charlie Brown and Ecroblack; 2. To allow the claim under section 275 of the 1991 Act in relation to the partnership agreement, on the basis that it was harsh, unfair and unconscionable, to proceed. 18 In 1997 Ms Brown and Charlie Brown applied to the Equity Division of the Supreme Court to vary the order made by McLelland CJ in Eq on 3 July 1995 pursuant to the slip rule and sought leave to further amend their statement of claim. The amendment sought pursuant to the slip rule was that instead of an order "dismissing" parts of the claims for relief in the Trade Practices Act and Fair Trading Act proceedings, the claims would be ordered to have been "discontinued". 19 In a judgment given on 25 August 1997, McLelland CJ in Eq dismissed both the claim to amend pursuant to the slip rule and the application to amend the statement of claim. In his reasons, his Honour emphasised that the claims for relief, including par 25(i), were "expressly abandoned".

20 In 1998, Ms Brown and Charlie Brown successfully sued Mr Geoffrey Frumar, a solicitor who had drafted the deed of partnership between Charlie Brown and Ecroblack. Schmidt J, summarised the proceedings against Mr Frumar and the outcome in her judgment of 2 December 1998: Studdert J held in the Supreme Court on 20 May 1998 in Charlie Brown Pty Limited & Anor v Frumar (Unreported), that Mr Frumar had not acted for the applicants when drafting the agreement; that Ms Brown had relied upon Mr Frumar as to the content of the agreement; that he ought reasonably to have known that she may have placed such reliance upon him (he had acted for the partners in relation to other transactions); that he should have advised her that he was not acting for her, but was acting for Mr Green and that she should therefore look for legal advice elsewhere; that the agreement had been drafted in accordance with instructions given by Mr Green; that the agreement had a number of deficiencies of which Mr Frumar was aware and which reflected Mr Green's instructions and another deficiency in drafting which had led McLelland J to dismiss the claim brought by the applicants in respect of the construction of the partnership agreement. Studdert J also found contributory negligence on the part of Ms Brown and apportioned fault on the basis of a 50% reduction of the damages he awarded, on account of that negligence. 21 The next development was a decision by Cohen J in the Equity Division of the Supreme Court on 10 June 1998 in which his Honour allowed Ms Brown and Charlie Brown to amend the statement of claim filed on 7 December 1994 in the proceedings against the appellants. Cohen J described the amendments as "really a total re-casting" of the claims earlier made. 22 Schmidt J explained the judgment of Cohen J in her judgment of 2 December 1998: Cohen J described the relief sought at p5-6: "The relief sought is set out in the proposed new paragraph 26. A declaration is sought that the second and third defendants have acted in breach of the representations and the varied partnership agreement or alternatively to the collateral contract constituted by the representations. The second declaration sought is to the effect that if the defendants had acted in accordance with the representations and promises then the assets of the partnership business would have included the distributorship agreement with the third defendant, a right to have merchandise supplied by the third defendant at a 10% discount and a right in the partnership business to trade under the name Howard Showers, notwithstanding the dissolution of the partnership." The defendants argued that the plaintiffs were estopped from making the claim, having regard to the principles set out in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 .

Cohen J accepted that it was a recognised principle that 'proceedings cannot be brought if they would have the result that they would be in conflict with an earlier judgement between the parties'.

Cohen J noted at page 11 however, that before orders were made by McLelland J dismissing the applicable Trade Practices Act and Fair Trading Act claims: "...senior counsel for the plaintiffs indicated that his clients would seek to amend their claim so as to allege contractual rights in respect of the purchasing and distribution of Howard Showers clothing by the partnership. It was clearly in the contemplation of McLelland CJ in Eq that an application for amendment of some sort would be made after the orders of 3 July 1995. There was no suggestion in the judgment that any objection was raised by the defendants to the effect that the facts could not be relied upon in support of any different relief." Cohen J also noted that the amended statement of claim alleged various representations, but there was no allegation made that the representations were untrue or misleading and no issue was raised as to the proper content or construction of the partnership agreement.

At p13-14, Cohen J concluded that the Anshun principle did not apply to the application before him, for three reasons: "... First, the allegations of fact or representation in the proposed amendment, although similar in content, are not the same as those in the present statement of claim. In order to support the claims relating to the Trade Practices and Fair Trading Acts , it was necessary to show that the representations as made were deceptive and misleading. The plaintiffs now seek to say that the representations were accepted and formed the basis for a collateral agreement. It is an alleged breach of the representations upon which the plaintiffs now wish to rely, not a claim that those representations were misleading. Secondly, the separate issue before McLelland CJ in Eq in June 1995 was whether the facts then alleged could support part of the relief claimed. He did not have to adjudicate on the issue. The relief sought, and dismissed after its withdrawal, was not inconsistent with the relief now sought. Damages were and still are claimed, but not because of breaches of the two statutes. The declaratory relief relating to the partnership is not to establish its ownership of particular assets but makes a claim that the breaches by the defendants deprived the partnership of those assets. There seems to be no inconsistency between the relief now sought and the dismissal of the relief previously sought. Thirdly, the plaintiffs indicated at the time of withdrawing some of their earlier claims, that they would be seeking amendments. Those which were foreshadowed were different to the present claim, that they were to be based on similar facts to those now sought to be alleged. In the circumstances in which the earlier dismissal occurred, I do not consider that it could be said to be an abuse of process now to permit the amendments, even though they are of a different nature. It seems to me that these matters amount to special circumstances which would permit amendments now to be made." Cohen J was aware of the proceedings before this Court. They were raised as a reason for refusing the application to amend the statement of claim before him. His Honour observed at p14 - 15: "There have been other submissions as to why the application to file a further amended statement of claim should be refused. It was said that as a consequence of the dismissal of the claims for relief on 3 July 1995, decisions have been made in the Industrial Relations Court (sic) in reliance on those orders. I was informed that there are further matters to be dealt with by that Court. I do not see how the allowing of an amendment arising out of contract which is collateral to the partnership agreement could prejudice the position in the Industrial Relations Court (sic). It is not said that the claimed collateral contract became part of the partnership agreement as had been previously claimed. What was stayed in that Court were claims which in effect were the same as the statutory claims which had been made and then abandoned in these proceedings. The allowing of an amendment would not in my view cause an embarrassment in the conduct of the Industrial proceedings." Cohen J gave leave to amend the statement of claim, but stayed the proceedings until the plaintiffs had paid the defendant's outstanding costs, assessed at some $16,000. 23 In her judgment of 2 December 1998 Schmidt J dealt with an application by Ms Brown and Charlie Brown to amend the summons initiating the proceedings before her. The application for leave to amend, it was said, arose out of the decisions by Studdert J and Cohen J in the Supreme Court.

24 In her consideration of the application for leave to amend, her Honour said: This application must be considered in the light of the actual interlocutory order made on 6 August, which as earlier noted, was that: "The applicants' claim for relief under section 275 of the Act, which arises out of misrepresentation alleged on the part of Mr Green as to the terms of the partnership agreement entered into between the second applicant and the third respondent, is permanently stayed." That order was made in particular circumstances, namely that the relief claimed in these proceedings was supported by misrepresentations alleged to have been made by Mr Green to Ms Brown, in similar terms to those asserted in the Supreme Court proceedings, where they were said to have given rise to rights under the Trade Practices Act and the Fair Trading Act . McLelland J (sic) dismissed those claims, with the result that, in accordance with the Anshun approach, even though the misrepresentation claims were never heard or determined in the Supreme Court, the applicants were not entitled to pursue the same misrepresentation claims in these proceedings. The Supreme Court proceedings have now been amended, with leave of that Court. There has been no appeal from the decision of Cohen J. These proceedings do not involve an appeal from his Honour's decision, which must be regarded by this Court as having been properly decided. There were three particular matters upon which Cohen J's decision turned. The first went to the differences in the allegations of fact or representation sought to be advanced in the amended statement of claim and the fact that it was breach of representations, rather than misrepresentations, which the plaintiffs wished to pursue. The second matter went to the relief sought and then dismissed with the withdrawal of the claims before McLelland J, which his Honour was therefore never called upon to determine. Cohen J saw no inconsistency between the relief dismissed by McLelland J and that which the plaintiffs later sought to pursue before him. The third matter was the foreshadowed amendment of the claim before McLelland J, at the time of the withdrawal of the Trade Practices Act and the Fair Trading Act claims. Cohen J took the view that in these circumstances there was no abuse of process in permitting the amendments sought, which in his Honour's view amounted to special circumstances. It is in that context that the present application must be considered. There is now on foot in the Supreme Court a claim based on alleged representations and promises which are said to have given rise to a collateral contract. Those claims have not been determined. They do not depend upon claims of misrepresentation. It follows that the Anshun principle does not apply to a claim sought to be advanced in these proceedings on a similar footing. Furthermore, it seems to me that there is ample basis in all of the circumstances of this case, for the view to be properly taken that special circumstances now exist which make it appropriate to exercise the discretion which the Court has not to preclude or stay the amendment now sought. I take that view not only because of the circumstances in which McLelland J originally dismissed the Trade Practices Act and the Fair Trading Act claims and the leave given by Cohen J to amend the statement of claim in those proceedings, but also in the context of the decision given by Studdert J in Frumar. 25 On 7 June 2000 Schmidt J gave her substantive judgment in the proceedings. Her Honour found that both the consultancy agreement between Ms Brown and Image and the partnership agreement between Charlie Brown and Ecroblack, whether they are regarded as two separate contracts or an overall arrangement, were unfair within the meaning of s 275 of the 1991 Act. At par [75] of her judgment her Honour said: That conclusion flows both from express terms of the two contracts and from the conduct thereunder of Mr Green and the two corporate respondents, Image and Ecroblack, particularly when acting through Mr Green and Ms Drewe. That conduct threw into stark relief the unfairness of the contracts and arrangement in question, so far as the applicants were concerned. That conduct was not such as to pay any proper, or indeed, any regard to the rights and interests under the two contracts of the applicants, but rather was designed to unfairly advantage the respondents, at the applicants' expense. 26 In her judgment Schmidt J indicated the nature of the orders she intended to make and directed the parties to file and serve orders to reflect her judgment. Her Honour then gave a supplementary decision on 1 September 2000, deciding several issues relating to the form of the orders that had not been agreed between the parties and also making an order as to interest. The final orders were made on 8 September 2000. 27 Her Honour's orders included the variation of the consultancy agreement to provide for 12 months' notice, and the variation of the partnership agreement in several respects. Her Honour also made money orders in relation to the varied partnership agreement, including payments to the respondents for their loss of interest in, and loss of income under, the partnership agreement. Her Honour also ordered that the appellants pay the respondents' legal costs, and indemnify them against costs claimed against them, in relation to Supreme Court proceedings between the parties, and between the respondents and Mr Frumar (Mr Green's solicitor, who drafted the partnership agreement).

28 In their written submissions, the appellants summarised the effect of her Honour's orders: $150,000 12 months' notice

$142,927 Charlie Brown's legal costs in the combined Supreme Court proceedings

$88,668 Charlie Brown, legal costs in the Frumar proceedings

$237,092 Loss of adjusted income from partnership for 12 months from 27 September 1994

Total: $1,238,096 (not including s 275 legal costs).

Leave to Appeal 29 It is convenient at this stage to deal with the question of leave to appeal. The appeal and cross-appeal are brought from a decision under s 275 of the 1991 Act. Under that Act, leave to appeal is not required: GIO Australia Limited v O'Donnell (1996) 70 IR 1 at 17; Re Solicitors (State) Award (No 2) (1996) 72 IR 213 at 224; Vision Publishing Pty Ltd v PK Lane Holdings Pty Ltd (1998) 84 IR 277 at 280.

Nature of the Appeal 30 In Stone Microsystems (Aust) Pty Limited v Kwong (1997) 42 NSWLR 160 at 163 a Full Bench of the Commission in Court Session summarised the principles to be applied to appeals in unfair contract matters under s 191 of the 1991 Act: Accordingly, in the present appeal, issues relating to the existence of a contract or arrangement under which a person performs work in an industry and findings of fact and/or law relevant thereto, and the issue of the unfairness of any such contract or arrangement and findings of fact and law relevant thereto, are matters which will attract the normal principles which apply to appeals stricto sensu on questions of fact and/or law ; issues concerning the avoidance of the unfair contract or arrangement and the making and amount of monetary orders in connection therewith (except as to any questions of fact or law) will attract the principles applicable to the determination of appeals against discretionary decisions, namely, the principles laid down in House v The King and Mace v Murray. 31 We respectfully agree with and adopt this statement of the law relating to appeals under the 1991 Act. See also the discussion at pars [59] to [73] in Westfield Holdings v Adams [2001] NSWIRComm 293.

Whether Appeals Within Time 32 There are two issues to be addressed in connection with whether the appeal and cross-appeal are within time. Firstly, the appeal is from the judgment and orders of Schmidt J made on 2 December 1998, her judgment of 7 June 2000 and her Honour's judgment of 1 September 2000 and final orders of 8 September 2000. The appellants filed their application to appeal on 14 September 2000. The judgment and orders of 1 September and 8 September 2000 arose out of her Honour's judgment of 7 June 2000 and so no issue arises as to whether the appeal in relation to these judgments and orders were within time. The judgment of Schmidt J of 2 December 1998 may be properly described as an interlocutory judgment and pursuant to r 45 of the Industrial Relations Commission Rules 1996 (cf Pt 7 r 6 of the Industrial Court (Interim) Rules 1992) any decision made in any proceedings prior to a final decision in the proceedings is to be taken for the purposes of appeal to have been made on the same date as the date of the final decision. The effect of the rules is no different to the common law situation as it was understood: Nolan v Clifford (1904) 1 CLR 429; Crowley v Glissan (1905) 2 CLR 402. In any event, the present circumstances satisfy the common law as recently clarified by the High Court in Gerlach v Clifton Bricks Pty Ltd (2002) 76 ALJR 828 at 829.

33 The cross-appeal is an appeal against her Honour's decision of 1 September 2000 and the orders made by her Honour on 8 September 2000. The cross-appeal was only concerned with the calculation of interest. The cross-appellants challenged the ruling of Schmidt J that no interest should be awarded "during the period which these proceedings were stayed" (that is, from 6 August 1996 to 2 December 1998). Her Honour found that no interest should be ordered during that period, as the stay "flowed from the applicants' conduct of the Supreme Court proceedings".

34 On 8 December 2000 the respondents filed their application for leave to appeal and appeal and an application to extend time to appeal as well as an affidavit by Charles Roth, solicitor for the respondents, in support of the application to extend time.

35 We have had regard to the respondents' reasons for the late filing of the appeal, which include reasons that related to counsel's indisposition, and to the appellants' concession that if we were to grant the respondents an extension of time to lodge their appeal, the appellants would suffer no prejudice or inconvenience. We also note that the appellants neither object nor consent to the respondents' application for leave to extend time.

36 The principles applying to leave to extend time to appeal are conveniently referred to in the judgment of Wright J, President in LEP International Pty Limited v Caine (2000) 97 IR 35 at 45-46. We have had regard to the principles referred to by Wright J, and to the fact that, in our opinion, extending time would not prejudice the appellants. We have also had regard to the nature of the matter that is the subject of the cross-appeal and its close connection to the matters in the principal appeal. We grant the respondents' application for an extension of time to appeal.

Issues on Appeal 37 The Hon J W Shaw QC, with Mr A Moses of counsel, appeared for the appellants in the principal appeal and the respondents in the cross-appeal. As to the principal appeal, Mr Shaw, in his written submissions, identified the issues on appeal as follows: i. Whether the Learned Trial Judge wrongly applied Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 in granting the Respondent's leave to amend the summons for relief and refusing to stay the proceedings? ii. Should the Commission make orders which effect orders of the Supreme Court of New South Wales? iii. Was Image entitled to summarily terminate Ms Brown's consultancy agreement? iv. The principle of "clean hands" and the Commission's discretion. v. What principles are to be applied in varying a contract of employment. vi. The principles to be applied in determining an employee's duty to mitigate. vii. What principles are to be applied in varying a partnership agreement.

38 Mr F G Lever of counsel appeared for the respondents in the principal appeal and the appellants in the cross-appeal. As we have already noted the cross-appeal was only concerned with the calculation of interest during the period which these proceedings were stayed (that is, from 6 August 1996 to 2 December 1998).

39 By notice of motion referred to the Full Bench, Ms Brown and Charlie Brown applied for an adjustment to orders made by Schmidt J under the slip rule. It was contended that a clerical error had occurred in that the figure of $332,668 in order B6 made by her Honour on 8 September 2000 was incorrect and that the figure should read "$363,335".

The Application of Anshun 40 We propose to deal firstly with the issue of whether the extended form of res judicata known as Anshun estoppel applies in this case. Anshun estoppel prevents the re-litigation of an issue where this would be an abuse of process. The principle arises out of the High Court's judgment in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589.

41 This issue arises out of the judgment of Schmidt J given on 2 December 1998 where her Honour granted leave to the respondents to file and serve the further amended summons in the proceedings under s 275 of the 1991 Act and varied her stay order of 6 August 1996 to allow the claims made in the further amended summons to proceed.

42 In their written submissions, the appellants contended that: … the learned Trial judge should not have allowed the amendment to the summons, because in substance the Respondents were seeking to rely on the same subject matter or critical facts as those relied upon the (sic) Trade Practices Act and Fair Trading Act claims dismissed by McLelland J on 3 July 1995: see for example Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589.

43 It was further submitted by the appellants that: Having regard to the proper application of the Anshun case as set out above, it is clear that the learned Trial Judge did not properly exercise her discretion, when the amendment of the summons was allowed. Put simply, the amendment allowed the Respondents to vex the Appellants twice for the same cause. There were no special circumstances in this case which fell within any of the exceptions referred to in Henderson v Henderson . It follows that the learned Trial Judge fell into error when allowing the amendment to the summons.

44 In Port of Melbourne Authority v Anshun Pty Limited, the owner and the hirer of a crane were both successfully sued for damages by an injured worker. The owner then sought to bring an action against the hirer, claiming that it had agreed to indemnify it against any actions. The owner had not raised the indemnity as an issue in the first trial. The trial judge ordered that the owner could not bring the action claiming the indemnity against the hirer, as this issue should have been raised in the original action. The decision to stay the action was upheld by the High Court.

45 The propositions for which Anshun is authority are contained in the majority judgment of Gibbs CJ, Mason and Aickin JJ. The majority made it clear that this was not a case of res judicata, as the indemnity cause of action had not been litigated in the first action. For similar reasons, it was not a case of issue estoppel (at 597-598). The critical issue was whether the case was within the "extended principle" expressed by Sir James Wigram VC in Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 at 319: "where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time." 46 Their Honours considered that, in applying the extended principle, the proper approach was that (at 602-603): In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.

47 And stated at 603-604 that: The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding. By "conflicting" judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction. 48 The majority applied the principles set out above in concluding that the stay was properly granted (at 604): The matter now sought to be raised by the Authority was a defence to Anshun 's claim in the first action. It was so closely connected with the subject matter of that action that it was to be expected that it would be relied upon as a defence to that claim and as a basis for recovery by the Authority from Anshun . The third party procedures were introduced to enable this to be done. If successful, the indemnity case would have obviated an inquiry into contribution. If reserved for assertion in a later action, it would increase costs and give rise to a conflicting judgment. 49 The Anshun principle also applies to cases where an applicant asserts a claim in proceedings unsuccessfully and subsequently institutes fresh proceedings based on a different cause of action which relies substantially on the same facts as the first proceedings: Rahme v Commonwealth Bank of Australia (NSWCA, unreported, 20 December 1991), discussed in Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 at 297.

50 In Bryant the Court (at 297) approved and adopted the statement of principle set out by Priestley JA (with Meagher and Hope JA agreeing) in Rahme: In Rahme v Commonwealth Bank of Australia (20 December 1991, not reported) the New South Wales Court of Appeal had to consider the application of Anshun in a case that was the converse of the present. The appellants, Mr and Mrs Rahme, had previously brought an action in this Court claiming damages in relation to arrangements for a foreign currency loan. They relied on an assortment of causes of action including negligent advice, breach of a contractual duty of care, contravention of the Trade Practices Act 1974, fraud and breach of fiduciary duty. The action failed. They then instituted a second action, in the Supreme Court of New South Wales, in which they claimed relief under the Contracts Review Act 1980 (NSW). The bank pleaded the Anshun principle. This plea was determined, favourably to the bank, as a preliminary point. In dismissing the appeal, Priestley JA, with whom Meagher JA and Hope A-JA agreed, analysed Anshun to be authority for the following propositions: "1, that Wigram VC's extended principle as stated in Henderson is accepted as good law by the High Court; 2, that that principle applies, inter alia, to category (3) cases, that is to a proceeding in which a party is asserting a cause of action which could have been raised, but was not, in a previous proceeding in which the same party was asserting a different cause of action based on substantially the same facts against the same party as the second proceeding is being brought; and 3, that the extended principle of Henderson will be applied to the second proceeding when it was unreasonable for the party asserting the cause of action in that second proceeding to refrain from raising it in the earlier proceeding against the same opponent party." Priestley JA said that the relevant question was: "whether the claim sought to be raised in the Supreme Court under the Contracts Review Act (a) could have been raised in the Federal Court proceedings and (b) raised matters so clearly part of the subject matter of the Federal Court proceedings that it was unreasonable on the part of the appellants not to have raised that claim in those proceedings." He said that question (b) should not be answered by reference to any verbal formula. He accepted a submission that the Court should ask itself "was it unreasonable of the appellants to have refrained from raising the claims now made in the proceedings before the Federal Court?" Answering this question in the affirmative, it followed that the appeal failed. It seems to us that the approach taken in Rahme should be followed in this Court. It is not inconsistent with anything stated in Anshun ; indeed it is consonant with the High Court's placing emphasis on looking at the substance of the issue sought to be raised in the later case, rather than on its form. Whether the claim sought to be raised in the Supreme Court under the Contracts Review Act (a) could have been raised in the Federal Court proceedings and (b) raised matters so clearly part of the subject matter of the Federal Court proceedings that it was unreasonable on the part of the appellants not to have raised that claim in those proceedings. 51 The decision in Anshun has been described as an application of a court's inherent power to prevent an abuse of process, which supplements the less flexible doctrines of res judicata and issue estoppel. As Handley JA somewhat colourfully put it, writing extrajudicially (Handley, (1997) "Anshun Today" 71 Australian Law Journal 934 at 934): In the language of the stud book, one might say that Anshun was by abuse of process out of Henderson v Henderson . The extended doctrine of which Anshun is only part, supplements the doctrines of merger, cause of action estoppel and issue estoppel. 52 Madgwick J in Stuart v Sanderson (2000) 175 ALR 681 sets out a comprehensive analysis and discussion of the Anshun case. (See especially at 686-689). At 686 his Honour said: The [ Anshun ] principle is thus not founded only upon the need to restrain costs between parties in dispute, although that is one of its purposes ( Bryant at 298, and Trawl Industries v Effem Foods (1992) 36 FCR 406 at 423 per Gummow J). It is also founded upon the need to avoid 'conflicting' judgments ( Anshun at 603 - 604), to ensure finality of litigation ( Anshun at 609, per Brennan, and Bryant at 299), to prevent parties from gaining an advantage in the use of the Court's time (Handley at 938) and, in the more global expression of Murphy J "to preserve the orderly administration of justice" ( Anshun at 605); that expression might include, for example, the maintenance of the appearance of good order, so as to sustain public confidence in curial disposition of disputes. 53 There are a number of suggestions in the authorities and secondary sources that the Anshun principle, at least to the extent that it adopts the "extended principle" in Henderson, should be applied with caution. In Cross on Evidence, Australian Edition, it is noted that the principle in Henderson has been applied in Australia "with great caution" [5170]. In Rogers v The Queen (1994) 181 CLR 251, Deane and Gaudron JJ suggested (at 275) that the "extended principle" in Henderson, if it was a principle at all, was to be "treated with caution". In Bryant at 296, citing Yat Tung Investments Co Ltd v Dao Heng Bank Ltd [1975] AC 581, at 590 the Court said that the Anshun principle should be applied only after a "scrupulous examination of all the circumstances". See also Ling v Commonwealth (1996) 68 FCR 180 at 182.

54 The operation of the "special circumstances" exception to the Anshun principle was considered in detail by Madgwick J in Sanderson (at 687-690). His Honour concluded that the application of Anshun was discretionary, and that this discretion was to be exercised by considering whether it did not apply because of special circumstances. His Honour, therefore, stated the Anshun principle as requiring that: (at 689, par 31) where a party has behaved unreasonably in not raising a matter in the earlier proceedings, that party will in general not be permitted to later litigate it, unless there are special circumstances. 55 His Honour further stated that: (at 689, par [32]) There appear logically to be two broad considerations that might be relevant to the determination of whether special circumstances exist. First, circumstances may in some way account for the unreasonable conduct involved in not having pressed the matter in the earlier proceeding, so as to excuse it... Second, circumstances may mean that application of the Anshun rule would work such a degree of hardship or of injustice on a party as to justify the displacement of the prima facie rule. 56 The nature of the special circumstances exception was also discussed in Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287, especially at 298-299 where it was said that the exception: comprehend[s] situations where, for broad discretionary considerations related to notions of justice, [the principle] should not be applied with full rigour. Orders of Schmidt J - 6 August 1996, 2 December 1998 57 In her decision of 2 December 1998 Schmidt J ordered that "Leave is given to file and serve the Further Amended Summons in these proceedings and the order of 6 August is varied in so far as is necessary to give effect to that leave." The order of 6 August 1996 permanently stayed that part of the respondents' claim for relief that arose out of the misrepresentation alleged on the part of Mr Green as to the terms of the partnership agreement. The question arises as to the effect of her Honour's order of 2 December 1998 on her earlier order of 6 August 1996.

58 We consider that the essence of Schmidt J's reasoning in giving leave to amend in her judgment of 2 December 1998 was that based on the approach taken by Cohen J, whereby he saw no inconsistency between the relief dismissed by McLelland CJ in Eq and that which the plaintiffs later sought to pursue before him, it was open to her Honour to take a similar approach. This was because in her view, like the proposed amendment before Cohen J, the further amended summons before her Honour had disavowed any claim based on misrepresentation and now sought relief based on alleged representations and promises that were said to give rise to a collateral contract. Schmidt J noted that there had been no appeal from the judgment of Cohen J. Her Honour also took into consideration the judgment of Studdert J in relation to the conduct of Mr Green's solicitor, Mr Frumar and the circumstances in which McLelland CJ in Eq originally dismissed the Trade Practices Act and Fair Trading Act claims. Consequently, her Honour found there were special circumstances making it appropriate to exercise her discretion to grant leave to amend.

59 It appears that what her Honour intended by her order of 2 December 1998 was that because of special circumstances that she found to exist, including the withdrawal of claims based on misrepresentation, Anshun estoppel did not apply but that in the event the respondents sought to renew claims based on misrepresentation during the substantive proceedings, the stay order of 6 August 1996 would apply. We note that her Honour's decision of 2 December 1998 was not appealed and the appellants took no subsequent objections in the substantive proceedings before Schmidt J on the grounds that the claims being made by the respondents were claims based on misrepresentation and, therefore, barred by the order of 6 August 1996.

60 What needs to be done in respect of the order of 6 August depends upon our view on appeal as to the applicability of Anshun.

61 In the present proceedings, the appellants acknowledged that what was sought to be raised in the Supreme Court by the further amended statement of claim that was before Cohen J was "qualitatively different from the earlier allegations or pleadings that had been earlier dismissed" by McLelland CJ in Eq. Mr Shaw submitted that: In other words, misrepresentation was effectively abandoned, so his Honour [ Cohen J] was not amending the Statement of Claim to allow the litigation of matters which had earlier been pleaded and dismissed by the court. Rather, his Honour was amending the Statement of Claim to allow matters to be raised which were qualitatively different and in some ways antithetical to the earlier allegations, that the plaintiff at that stage wasn't seeking to rely on misrepresentation, misleading conduct, it was accepting the representations. So what was sought to be raised by the Further Amended Statement of Claim was something quite different, whereas formerly it was pleaded the representations were deceptive or misleading, the plaintiffs there disavowed a claim that the representations were misleading, so one can understand the approach taken by Cohen J.

62 The appellants submitted, however, that in seeking to amend their summons before Schmidt J the respondents were seeking to rely upon the same subject matter or critical facts as those relied upon under the Trade Practices Act and Fair Trading Act claims before McLelland CJ in Eq. Further, it was submitted, there were no special circumstances existing that would allow an exception to the application of the Anshun principle.

63 In seeking to illustrate the respondent's reliance on "the same subject matter or critical facts" Mr Shaw referred, firstly, to the amended statement of claim considered by McLelland CJ in Eq in his judgment of 26 June 1995 in which he dismissed the claims for relief based on the Trade Practices Act and Fair Trading Act. The claims were based on allegations of misleading and deceptive conduct and, therefore, said to be contrary to those statutes. One of the allegations in the amended statement of claim was that: 11A. In or about November 1992 the First Defendant [Mr Green] represented to Charlotte Brown that in the event that she and the First Defendant entered into partnership the partnership agreement would provide that if either of them did not wish to work with the other then the other could buy his or her interest in the business. 64 It was further alleged in the amended statement of claim that, acting on the faith of the foregoing alleged representation and other representations, Charlotte Brown was induced to enter into a partnership agreement with Mr Green. It was alleged that in making the representation in par 11A of the amended statement of claim and other representations, Mr Green and Ecroblack engaged in misleading and deceptive conduct in trade and commerce in contravention of s 52 of the Trade Practices Act in the case of Ecroblack or s 42 of the Fair Trading Act in the case of each of Mr Green and Ecroblack. 65 Mr Shaw then referred to the principal judgment of Schmidt J delivered on 7 June 2000 where her Honour, in summarising the case put for Ms Brown and Charlie Brown, at par [34] referred to the "promises and representations" made by Mr Green to Ms Brown in discussing the formation of the contract. One of the promises and representations was: That if either partner did not wish to continue with the partnership, the other could buy out that partner's interest.

66 Paragraph [35] of her Honour's judgment goes on to state: Ms Brown had a father/daughter relationship with Mr Green at this time, which Mr Green had acknowledged in his evidence and as a result, she had trusted him to meet these promises. As Mr Green had also acknowledged, despite his understanding of Ms Brown's trust in him, he had not treated her in that fashion and had instructed his solicitor to draft a one-sided partnership agreement, which he could and later did manipulate to his advantage. Further, Mr Green took steps to deprive the partnership of the exclusive right to use the Howard Showers name, deceiving Ms Brown as to his steps in relation to this matter. 67 Mr Shaw contended, in effect, that the claim dismissed by McLelland CJ in Eq was based on a factual situation giving rise to allegations of misleading and deceptive conduct and that it was the same claim agitated before her Honour; that to say, as Mr Lever did in his written submissions, that Mr Green had no intention of honouring promises he made to Ms Brown is simply another way of saying that Mr Green engaged in misleading and deceptive conduct. In substance, Mr Shaw submitted, the claims were the same in both jurisdictions and were based on the same facts, therefore, it was not open to Schmidt J in her judgment of 2 December 1998 to order leave to amend the summons.

68 Mr Shaw further submitted that there were no special circumstances that would render the Anshun principle inapplicable; that the dismissal by McLelland CJ in Eq of the claims based on allegations of misrepresentation, in the knowledge that the plaintiffs intended to amend their claim, did not constitute a special circumstance. Mr Shaw said the decision to seek dismissal was an informed decision taken on legal advice as a tactic designed "to keep the door open for proceedings to be commenced" before the Commission in Court Session. Such tactical manoeuvring was against the whole rationale of Anshun and the Court would not countenance it by allowing the appellants to have "a second bite of the cherry". Further, Mr Shaw submitted, the decision of Studdert J in Frumar was not a relevant consideration as to whether a special circumstance existed that would enable Schmidt J to exercise her discretion to give leave to amend.

69 Mr Shaw also contended that it must have been obvious to the appellants from the outset of the extensive litigation on which they embarked that it was open to them to commence proceedings under s 275 of the 1991 Act or that the respondents could have included a cause of action under s 275 of the 1991 Act in the Equity proceedings: see for example, Bruning v Kingmill (Australia) Pty Limited (1998) 85 IR 78; Heath Group Australasia Pty Ltd v Hanning [1999] NSWSC 719. However, they chose to commence proceedings in the Supreme Court with claims being made under the Trade Practices Act and Fair Trading Act. Having decided they made a tactical error, the appellants sought to have the claim dismissed (another alleged mistake because the appellants later sought to amend the relevant order to substitute "discontinued" for "dismissed"). Mr Shaw submitted that having made the wrong choice as to jurisdiction and having had their claims dismissed in the Equity Division of the Supreme Court, the appellants should not now be entitled to pursue essentially the same claims based on essentially the same facts under s 275 of the 1991Act.

70 Mr Lever's submissions for the respondents on the application of Anshun may be summarised as follows:

What was initially sought in the Equity Division of the Supreme Court was fundamentally enforcement of the partnership agreement. The cause of action was quite different to what was sought under s 275 of the 1991 Act. It was not until after McLelland CJ in Eq delivered judgment that it became apparent from his Honour's judgment that the partnership agreement was unfair. As soon as possible after McLelland CJ in Eq declared that the partnership was dissolved (3 July 1995) the respondents commenced proceedings under s 275 of the 1991 Act before the Commission in Court Session (7 July 1995). Having commenced proceedings before the Commission in Court Session it was sensible that they continue in that specialist jurisdiction.

Bruning v Kingmill (Aust) Pty Ltd can be distinguished. In that case, proceedings had already been brought in the Commission in Court Session and it was by consent of the parties to those proceedings that an order was sought under the Jurisdiction of Courts (Cross-vesting) Act 1987 that the proceedings be removed to the Equity Division of the Supreme Court because of a substantial overlap in issues. Pursuant to s 9(b) of that Act the Supreme Court had power to make orders which the Commission in Court Session could make under s 106 of the Industrial Relations Act 1996. In the present case, there was no reason to transfer the proceedings to the Equity Division of the Supreme Court. The Equity proceedings are on foot but they are stayed and therefore remain unresolved.

The Anshun estoppel argument "is no longer available" as a result of leave being granted in the Supreme Court to amend the summons.

There are clearly "special circumstances" which justified her Honour's decision: see Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 512 per Dawson J. The special circumstances arise from the fact that Her Honour was able to evaluate the full factual matrix that determined the overall inequality of the parties' relationship and the unfairness of the employment arrangements and the partnership agreement.

The respondents argue that in these proceedings they "do not rely on the representations as being misleading and deceptive". Instead, they claim that: · The representations were promises, in the nature of a collateral contract, which induced them to enter the partnership agreement; and that · Mr Green never intended to honour the promises instructed his solicitor to draft a partnership agreement that gave almost no protection to Ms Brown's interests.

The respondents submitted that her Honour's analysis of the decision of Cohen J cannot be questioned, and that her decision complements his Honour's findings. They also contended that Cohen J: was well aware of these proceedings and that his leave was sought to amend the statement of claim so that the stay in these proceedings could be lifted.

Hibbert v Libidineuse (1990) 37 IR 150 can be distinguished. The applicants in Hibbert sought the same relief in both the Federal Court and in the proceedings before the Commission in Court Session that is that the unfair contract be varied to provide a vehicle for the payment of compensation. The same facts were relied on in both proceedings for the same relief.

McGurk v ECC Lighting Limited (1996) 82 IR 102 is not on point. In that case the applicant sought substantially the same relief in the Supreme Court and in the Industrial Court. That is, his employer, based on an oral contract or arrangement, should pay him a bonus. Hungerford J held at 115: I am of the opinion that once the Supreme Court entered judgment on 9 February 1996 on the bonus claim, all of the rights that the applicant had under section 275 became merged in that judgment. In the result, issue estoppel operates to bar the applicant further litigating his bonus claim under section 275.

71 In submitting that the respondents were estopped from pursuing their claims under s 275 of the 1991 Act, the appellants relied exclusively on Anshun estoppel. No submissions were made by the appellants in respect of the application of cause of action estoppel or issue estoppel.

72 There is a fundamental difference between cause of action and issue estoppel on the one hand and Anshun estoppel on the other. As Clarke JA notes in Macquarie Bank v National Mutual Life Association of Australasia Ltd & Larcombe (1996) 40 NSWLR 543 (Clarke JA refers to 'estoppel by record' which may be taken as including both cause of action and issue estoppel) at 558: There is, of course, a similarity between estoppel by record and the Anshun principle but there are also fundamental differences. In the former, proof that a party is seeking further to litigate a cause of action which has previously been taken to judgment operates as a complete bar to the later action. In the latter, the estoppel operates only where the new litigation involves a point or points which properly belonged to the first proceeding ( Henderson ) or unreasonably was or were not included in it ( Anshun ), and the appropriate order is a stay of proceedings. However, even where it is found that the point was unreasonably omitted from the first case, the court retains a discretion not to stay the second proceedings if special circumstances exist. 73 In these proceedings, consistent with the submissions of the appellants, we have confined ourselves to a consideration of whether Anshun estoppel applies. In doing so, we are cognisant of the warning by Deane and Gaudron JJ in Rogers v The Queen that the principle enunciated in Henderson v Henderson, if it is a principle at all, is to be treated with caution. Similarly, in Ling v Commonwealth, Wilcox J observed at 182: The principle applied by the High Court of Australia in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 is designed to minimise the burden of litigation. It enables courts to ensure that parties put their whole case forward at one time, thereby eliminating duplication of effort and expense and reducing the opportunity for a party to harass a weaker opponent with repeated suits. However, these benefits come at a price. The result of a court applying the principle is to shut out a claim or defence that a party wishes to pursue, without determination of its intrinsic merit, on the ground that it ought to have been raised in earlier litigation. As the Judicial Committee of the Privy Council pointed out in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581 at 590, this is a serious step, a power not to be exercised except after a scrupulous examination of all of the circumstances". If the Anshun principle is too readily applied, there is a possibility of serious injustices.

74 It was also stated by Wilcox J in Ling v Commonwealth, at 184: The fundamental issue in the application of the Anshun principle is whether it was reasonable for the party bringing the second action to have failed to raise its subject in the first action. In Anshun at 602, Gibbs CJ, Mason and Aitkin JJ stated the relevant principle in these words: "... there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it." Although their Honours were dealing with failure to raise a defence, the concept of reasonableness has been applied to failure to raise a claim: see Priestley JA in Rahme v Commonwealth Bank of Australia (New South Wales Court of Appeal, 20 December 1991, not reported) which is discussed in Bryant at 297.

In considering reasonableness, as it seems to me, consideration must be given to all aspects of the case. They include the extent of the overlap between the facts underlying each claim; the greater the overlap, the easier it is to argue that it was unreasonable not to raise the matter in the first case. They also include any difficulties that existed, or might reasonably have been perceived, in raising the matter earlier. 75 Even if a party has acted unreasonably in not raising a matter in the earlier proceedings a court retains the discretion not to stay the second proceedings if special circumstances exist: Sanderson at 689; Macquarie Bank v National Mutual per Clarke JA at 558.

76 Even if it could be said that it was unreasonable of the respondents not to have pursued to finality the full extent of their claims before McLelland CJ in Eq we consider that there are special circumstances existing that displace the operation of the Anshun principle.

77 As Wilcox J observed in Ling v Commonwealth, "consideration must be given to all aspects of the case" and in doing so we have come to the view that an injustice would result if the Anshun principle were applied.

78 In his judgment of 26 June 1995, McLelland CJ in Eq found that it was no longer necessary to consider the respondents' entitlement to relief in relation to the misrepresentation claims under the Trade Practices Act or the Fair Trading Act because the respondents had indicated that they did not wish to pursue the claims. Consequently, these particular claims were dismissed but the respondents pressed on with their claims for enforcement of the partnership agreement. In this respect the respondents were unsuccessful. McLelland CJ in Eq found that the provision in the partnership agreement relied upon by the respondents (cl 13) to the effect that, upon termination of the partnership the partner resigning or retiring was required to sell its interest in the partnership to the remaining partner, did not apply in the circumstances. McLelland CJ in Eq found that cl 11 applied. This was a general winding up provision triggered by notice given by Ecroblack in accordance with s 32 of the Partnership Act 1892.

79 McLelland CJ in Eq was critical of the drafting of the partnership agreement, noting that there was a serious problem of construction arising from the contrast between the effects of a determination of the partnership provided by cl 11 on the one hand and cll 12, 13 and 14 on the other. At the time, McLelland CJ in Eq was not aware of the fact that Mr Green had given instructions to his solicitor, Mr Frumar, to draft an agreement that he could, and later did, manipulate to his own advantage. Indeed, Mr Green instructed his solicitor not to include in the agreement any provisions that may have had the effect of explaining how cl 13 applied vis a vis cl 11. Ms Brown signed the agreement without receiving any legal advice on it in circumstances where she trusted Mr Green implicitly and placed reliance on Mr Frumar as to the content of the agreement: see Frumar at 9 and 20.

80 On 7 July 1995, four days after McLelland CJ in Eq delivered judgment, the respondents commenced proceedings under s 275 of the 1991 Act. As we have already noted, based on the Anshun principle, Schmidt J permanently stayed the applicants' [respondents on appeal] claim for relief that arose out of the misrepresentation alleged on the part of Mr Green as to the terms of the partnership agreement.

81 The respondents subsequently sought to amend the dismissal order made by McLelland CJ in Eq on 3 July 1995 to one of discontinuance in order to overcome the estoppel defence upheld in part by Schmidt J. In his judgment of 25 August 1997 McLelland CJ in Eq held that the application to amend had been made far too late in the proceedings. It is to be noted, however, in dismissing the claims McLelland CJ in Eq did so "without prejudice to any future application by the plaintiffs [the respondents on appeal] for leave to further amend the statement of claim". During the proceedings his Honour had been informed of: …the possible amendment of the statement of claim in proceedings 4074/94, for the purpose of introducing a claim to the effect, as I understand it, that there was an agreement between the two partners on the one hand, and the third defendant in those proceedings, Image Clothing Pty Ltd, on the other hand, which conferred contractual rights on the partnership in relation to the distribution of "Howard Showers" brand women's clothing, manufactured by the third defendant; such contractual rights, it is said, being such as to survive dissolution of the partnership, and to constitute an asset of the partnership business which is available for realisation in the course of the winding up of the partnership. As I understand it, it is also contemplated that even if there is no contractual right to that effect subsisting in the partnership, then alternatively, equivalent rights should be held to be established by some form of estoppel, or alternatively again, the Court should by reason of orders which may be made under the Fair Trading Act, or the Trade Practices Act, in effect create equivalent rights. 82 This aspect of the judgment of McLelland CJ in Eq was relied upon by Cohen J as one of the three reasons for granting leave to amend the respondents' statement of claim. In his judgment of 10 June 1998 Cohen J said: Thirdly, the plaintiffs indicated at the time of withdrawing some of their earlier claims, that they would be seeking amendments. Those which were foreshadowed were different to the present claim, that they were to be based on similar facts to those now sought to be alleged. In the circumstances in which the earlier dismissal occurred, I do not consider it could be said to be an abuse of process now to permit the amendments, even though they are of a different nature.

83 Cohen J accepted that the respondents' application to amend their statement of claim was not something entirely new; that it had been foreshadowed before McLelland CJ in Eq and, therefore, could not be said to be an abuse of process. Cohen J was speaking from the perspective that "the allegations of fact or representation in the proposed amendment, although similar in content, are not the same as those in the present statement of claim." Cohen J noted in his judgment that the proposed amendments to the statement of claim were really a "total re-casting of the amended statement of claim which was filed on 7 December 1994."

84 Schmidt J, in her judgment of 2 December 1998, found that the new claim before her was on a similar footing to the amended claim before Cohen J. That is, the further amended summons before Schmidt J had disavowed any claim based on misrepresentation and now sought relief based on alleged representations and promises that were said to give rise to a collateral contract. Her Honour noted that there had been no appeal from the decision of Cohen J "which must be regarded by this Court as having been properly decided". Her Honour also noted that Cohen J saw no inconsistency between the relief sought and then dismissed by McLelland CJ in Eq and that which the respondents later sought to pursue before him. We consider that on the material before her Honour it was clearly open to her to take the same approach as that adopted by Cohen J and we see no error in that respect.

85 The second matter that we consider attracts the special circumstance exception is the decision of Studdert J in Frumar. We observe that the allegation that Mr Green had given certain instructions to his solicitor, Mr Frumar, regarding the contents of the partnership agreement that were knowingly inconsistent with his representations to Ms Brown as to those contents, was part of the pleadings in the amended statement of claim of 7 December 1994 and which subsequently came before McLelland CJ in Eq. It could be said, therefore, that the respondents were alleging from the outset that Mr Green had misled and deceived them and it was open to them to have pursued those allegations against Mr Green before McLelland CJ in Eq but they chose not to do so. Further, that the judgment in Frumar did not throw up any new facts or circumstances and, therefore, did not constitute a special circumstance exception to the Anshun principle.

86 We disagree with this analysis. The judgment in Frumar was clearly an important development, occurring after the dismissal of claims by McLelland CJ in Eq, in the litigation between Mr Green and Ms Brown and it elucidated the extent of deception that had occurred. Schmidt J was entitled to take the judgment of Frumar into account in the way she did in weighing up whether special circumstances existed and in that respect we can find no error.

87 Accordingly, we find that Schmidt J did not wrongly apply the Anshun principle in granting the respondents leave to amend the summons for relief and in refusing to stay the proceedings.

Orders that affect orders made by the Supreme Court

88 In her judgments of 7 June and 1 September 2000 Schmidt J dealt with the question of claims by the applicants for compensation for legal costs incurred in the proceedings in the Supreme Court as well as the claim for indemnities in relation to costs claimed by Mr Green and Ecroblack in the Equity proceedings and costs awarded to Mr Frumar in the Common Law proceedings. Her Honour also dealt with the question of money orders that she considered should flow from the appellants' conduct in relation to the partnership business. In relation to these matters, her Honour made the following orders: … B3. Order that the Respondents pay the legal costs incurred by the applicants in: (a) the Equity proceedings $142,927.00 (b) the Common Law proceedings against Geoffrey Frumar $88,668.50 B4 Order that the respondents indemnify the applicants against the costs claimed by Alan Myer Green and Ecroblack Pty Limited in the Equity proceedings. B5 Order that the respondents indemnify the applicants against any costs awarded to Geoffrey Frumar in the Common Law proceedings. B6 An order that the respondents pay the applicants $332,668 as compensation for their loss of interest in the partnership made up as follows: (a) Value of the partnership as at 27/9/94 $513,070 (b) Less amount to be paid by applicants pursuant to clause 13 of the partnership agreement $89,840 $423,230 (c) Less that part of the amount paid to the applicants by the receiver of the partnership which does not relate to the partnership income $59,895 $363,335 89 In her judgment of 1 September 2000, Schmidt J explained her reasons for making the foregoing orders and those reasons may be summarised as follows:

· Notwithstanding the late attempt by the respondents to argue jurisdiction, the orders B3, B4 and B5 are within jurisdiction. The orders do not ignore the orders made by the Supreme Court or interfere with them, but are made precisely because of those orders, having in mind the issues raised in the proceedings as to the unfairness of the partnership provision on which the respondents relied and pursued in the Supreme Court and which gave rise to the proceedings against Mr Frumar.

· The proceedings under s 275 all resulted from the conduct of the respondents as permitted by the contracts and arrangement in question. Had the agreements in question not been unfair in the way in which her Honour found and had the respondents not conducted themselves thereunder in an unfair manner the legal proceedings and the costs incurred in them would have been unnecessary.

· As to orders B3, B4 and B5, the submission that the orders should not be made as they did not amount to an order for the payment of money in accordance with s 275(3) is rejected. The orders are precisely concerned with the payment of money sums in order to do justice as between the parties having regard to the unfairness that has been found and having in mind notions of restitution.

· That the orders B3, B4 and B5 are concerned with costs incurred in other litigation is not to the point. It is undoubted that there is a public interest in the way in which awards of costs are made in litigation. Nevertheless, that interest cannot subsume the jurisdiction granted by s 275 of the Act.

· It was also argued that there were difficulties with the form of the orders sought, as they were uncertain, did not specify a money sum and would not bring the litigation to an end. However, order B4 is an indemnity as to costs as between these parties. It gives rise to no uncertainty at all. Order B5 is concerned with the costs in the Frumar litigation. On analysis, the problem is not one of uncertainty as to amount, but rather one of timing. The amount of the costs will be determined in the ordinary way by the Supreme Court. The order takes effect when that has occurred and will then bring this litigation to an end. There is nothing unusual about orders that take effect over time, rather than immediately upon the conclusion of a hearing. Accordingly, those arguments are also rejected.

· As to order B6 her Honour decided that it was open to her to find that Ms Brown was entitled to a payment reflecting the value of the partnership business less the amount she would have had to pay under cl 13 of the partnership agreement and the amount she had already received from the receiver. Her Honour did not consider that the judgment of McLelland CJ in Eq made on 14 July 1995 precluded her from taking that approach.

90 In contesting orders B3 to B5, the appellants did not pursue their challenge on any jurisdictional basis. Instead, it was submitted that:

· The effect of her Honour's orders was to disturb the effect of costs orders made by another Superior Court of Record prior to the variation of the partnership agreement taking effect. In other words, the Commission should not retrospectively vary the agreement in such a way that has the effect of ignoring orders of the Supreme Court of New South Wales.

· In respect of orders B4 and B5 the orders are expressed as compensation orders. An indemnity does not amount to an order for the payment of money under s 275(3) of the 1991 Act.

· In respect of order B6, it does not arise from the partnership agreement as varied by the Commission. The order for variation only takes effect on the date on which the orders are made. In considering any order for the payment of money the order must take into account the judgment and orders of McLelland CJ in Eq made on 14 July 1995. As a result the order for compensation accepting the valuation of the business as calculated by Mr Elliott (the respondents' expert witness), must be limited to 30 per cent ($153,921) less an amount of $59,895 received from the Receiver being $94,026. The judgment also ignores the judgment of Studdert J of 20 May 1998.

91 In their outline of submissions the appellants contended that the making of orders B3 to B6 reflected an abuse of process. It was submitted that: Because of tactical decisions taken by the respondents (as evidenced by the history of litigation between the parties), the wholly unseemly situation has arisen of another Court, examining orders made by another Court, and being asked to find that those orders should be effectively displaced. That unseemly outcome is compounded by the fact that the Respondents breathtakingly claim from the Commission indemnities in respect of orders made or to be made by the Supreme Court of New South Wales. One is hard pressed to think of circumstances more likely to bring the administration of justice in this State into disrepute: Alexander Stenhouse v State Bank of New South Wales (1997) Aust Torts Reports 81-423. The present orders, especially as presently constituted, plainly amount to a collateral attack on judgments and orders of the Supreme Court of New South Wales …

92 The appellants acknowledged that their contentions relating to abuse of process had not been put at first instance in opposing the costs orders. We do not, therefore, consider that those contentions were available: cf Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 at 381-382. In any event we do not consider them soundly based.

93 The respondents' submissions relating to costs orders may be summarised as follows:

· The costs orders made by Schmidt J do not disturb the costs orders made by the Supreme Court. Nothing her Honour ordered affects the respondents' liability to pay costs in the Equity proceedings and (if such an order is made against them) in the common law proceedings. Her Honour has simply ordered that, if the other parties in those proceedings pursue their costs orders, then the appellants will indemnify the respondents.

· The respondents would not have incurred costs had the partnership been fair and had they been able to enforce the rights which they were induced by the appellants to believe they had should either party wish to bring the partnership to an end.

· The indemnity order is an "order as to the payment of money" and, therefore, a money order within the meaning of s 275(1) of the 1991 Act. The indemnity order is akin to an anti suit injunction.

· Her Honour's order varying the partnership agreement takes effect from the commencement of the partnership agreement not the date of the order: s 275(1) of the 1991 Act. Order B6 (that the appellants pay the respondents $332,668 as compensation for their loss of interest in the partnership), therefore, may be said to arise out of the variation of the partnership agreement. Consequently there is no basis for the appellants to submit that the respondents' compensation for the loss of their interest in the partnership business must be limited to 30 per cent less the amount paid to them by the receiver.

· The proceedings before Schmidt J were not an abuse of process.

94 The ratio of Schmidt J's judgment in relation to the costs orders is to be found in pars [197] and [198] of her judgment of 7 June 2000, namely: 197 Given the view which I have formed as to the conduct of the respondents in this case and the unfairness of the contracts and arrangement this conduct exposed, I take the view that the claim for legal costs incurred in the Supreme Court proceedings between these parties and those pursued against Mr Frumar by the applicants, should also be awarded in favour of the applicants, as well as the indemnities sought in relation to the costs incurred in those proceedings by Mr Green, Image, Ecroblack and Mr Frumar, which the applicants are obliged to meet. These costs cannot in my view simply be dismissed as having been incurred because the applicants did not diligently pursue these proceedings, as the respondents submitted. In Mr Frumar's case, for example, there was even evidence of an attempt by Mr Green, not persisted with, to prevent Mr Frumar giving evidence of his instructions. 198 Having in mind the evidence and my findings, I take the view that it must be concluded that these proceedings all resulted from the conduct of the respondents as permitted by the contracts and arrangement in question. Had the agreements here in question not been unfair in the way in which I have found and had the respondents not conducted themselves thereunder in the unfair manner I have described, these other proceedings and the costs incurred in them would have been unnecessary. I take the view that it would be just in the circumstances of this case, for these conclusions to be reflected in the monetary orders which I make.

95 In other words, her Honour found that if it had not been for the conduct of the appellants in the first place the proceedings in the Supreme Court would not have been necessary and the respondents would not have incurred the legal costs they did. Therefore, in remedying the unfairness it was necessary to vary the partnership agreement from its commencement and to restore the respondents, as close as practicable, to a position that they would have been in had it not been for the appellants' conduct. In doing so it was appropriate to make money orders relieving them of the burden of legal costs that they would not otherwise have incurred but for the conduct of the appellants.

96 The appellants have not cited any jurisdictional bar to the Commission making orders B3 to B5 and we do not consider there are any such barriers (We should be taken, however, as accepting the form of the orders made as either available or appropriate). The question, therefore, is whether Schmidt J failed properly to exercise the discretion committed to her in respect to the legal costs issue: House v The King (1936) 55 CLR 499 at 504-505; Mace v Murray (1955) 92 CLR 370 at 378.

97 In examining this question we observe, firstly, that in choosing the jurisdiction in which to pursue a remedy against the appellants, the respondents initially chose the Equity Division of the Supreme Court. And whilst we have found that special circumstances exist that displace the operation of the Anshun principle, we do not consider that the circumstances justify orders B3 to B5.

98 Having chosen their jurisdictional venue the respondents indicated to McLelland CJ in Eq that they did not intend to pursue their claim for relief in proceedings 4074/94 based on the Trade Practices Act and the Fair Trading Act and, consequently, his Honour dismissed that part of the respondents' claim. The respondents subsequently failed in their bid for relief and their remaining claims were dismissed. At the same time, McLelland CJ in Eq declared in proceedings 4136/94 that "the partnership between the plaintiff and the defendant carrying on the business of the retail sale of the designer label 'Howard Showers' clothing was dissolved on 27 September 1994" and also declared that "cl 13 of the deed of partnership dated 22 March 1993 between the plaintiff and the defendant has no application to such dissolution." His Honour ordered that the partnership be wound up under the direction of the Court and, in relation to costs, ordered the respondents to pay the costs of the appellants in both proceedings (4074/94 and 4136/94).

99 It is not appropriate, in our opinion, to now shift the burden of costs relating to the Equity proceedings from the respondents to the appellants. The Equity Division of the Supreme Court was the place chosen by the respondents to pursue their claims in relation to the partnership agreement; the Equity proceedings were discrete proceedings. The respondents' claims and those of the appellants were dealt with on their merits and the respondents lost. The costs orders were consequent upon that result. It would be extraordinarily rare for the Commission in Court Session to consider making orders that, in effect, reverse an integral part of the judgment of another court, including costs orders. It has at least the potential to amount to an unacceptable interference in proceedings of another court, and thus impact adversely on the integrity of the administration of justice.

100 The respondents contended that the orders made by Schmidt J do not disturb the costs orders made in the Supreme Court and that her Honour simply ordered that: (a) the appellants pay the legal costs incurred by the respondents in the Equity proceedings and the Common Law proceedings; (b) the appellants indemnify the respondents against costs claimed by Alan Green and Ecroblack in the Equity proceedings and any costs awarded to Geoffrey Frumar in the Common Law proceedings.

101 Mr Lever submitted that nothing Schmidt J had ordered has affected the respondents' liability to pay costs in the Equity proceedings and (if such an order is made against them) in the Common Law proceedings. We consider such a submission is untenable. To accept it would involve the triumph of form over substance. In the Equity proceedings in proceedings 4074/94 McLelland CJ in Eq ordered that the plaintiffs (the respondents in this appeal) pay to the defendants (the appellants) "(a) their costs of the determination of the separate questions pursuant to the order made on 7 April 1995; and (b) the general costs of the proceedings to date …" and that such costs be payable forthwith. In proceedings 4136/94 his Honour ordered that the defendant (Charlie Brown) pay to the plaintiff (Ecroblack) its costs of the proceedings to date and that such costs be payable forthwith.

102 For an order to be made by the Commission in Court Session that the appellants pay the legal costs of the respondents and that the appellants indemnify the respondents against any costs claimed by the appellants in the Supreme Court proceedings would, for all practical purposes, shift the burden of legal costs from the respondents to the appellants and would in a practical way undermine the integrity of the judgments in the Equity proceedings and cause unfairness to the appellants. This unfairness would be compounded by the fact that having had their claim for relief under s 275 of the 1991 Act arising out of alleged misrepresentations permanently stayed by Schmidt J on 6 August 1996, and having taken a decision to attempt to overcome that stay by seeking (unsuccessfully) further orders before McLelland CJ in Eq (see his Honour's judgment on the respondents' notice of motion of 25 August 1997), the respondents, nevertheless, seek to have the appellants pay the costs of the respondents' unsuccessful attempt to remedy their tactical approach or tactical errors.

103 In relation to the Common Law proceedings before Studdert J, costs of the proceedings were reserved pending determination of the issue of damages. The orders made by Schmidt J require the appellants to pay their legal costs incurred in the Common Law proceedings and for the appellants to indemnify the respondents against any costs awarded to Mr Frumar in those proceedings. In this respect, it will be recalled that Studdert J found that any damages to which Charlotte Brown might otherwise be entitled should be reduced by fifty per cent by reason of her contributory negligence.

104 The Common Law proceedings were, again, discrete proceedings brought by the respondents. To allow orders to stand that make the Common Law proceedings retrospectively risk-free for the respondents, in circumstances where it is possible that Charlotte Brown may be ordered to pay costs because of her contributory negligence, would pre-empt any judgment on costs by Studdert J. Here, too, we do not consider there is any basis whereby such orders could be said to meet the description of "just in the circumstances of the case" as required by s 275(3) of the Industrial Relations Act 1991 (cf s106(5) of the Industrial Relations Act 1996).

105 In 1994, following persistent approaches by Ms Brown, Mr Green invited Ms Brown to put a written proposal as to an equity participation in the 'Howard Showers' retail stores. Ms Brown retained a solicitor, Mr Roth to draft such a proposal and it was put to Mr Green. On being presented with Ms Brown's proposal, Mr Green threw the document back at her. Mr Green was surprised that Ms Brown had obtained the assistance of a solicitor and said in his evidence that he threw the document because he regarded it as stupid and wished to insult it.

106 The next day Mr Green told Ms Brown that she could "have" 'Howard Showers' for $4 million, as it was turning over $2.5 million in profits. Ms Brown reacted by saying "This is the last straw, I'm out of here". In this respect Schmidt J said: 116 It cannot be overlooked that these events took place at a time when Ms Brown had been told that Image had made a significant loss the preceding year, which she had had difficulty accepting given Image's apparent success and when she was being refused access to the company's accounts. 107 Schmidt J found that, whilst the language used by Ms Brown "did not necessarily reflect an intention to leave her employment with Image", the parties all acted on the basis that she had resigned.

108 The following day Ms Brown apologised to Mr Green for her conduct, sought to re-establish her relationship with him (which Schmidt J had said was in Ms Brown's mind "a father/daughter relationship"), and proposed a part-time consultancy agreement. Schmidt J then observed: 121 Mr Green rejected this proposal and offered a consultancy on terms which required Ms Brown to perform all of her old work, and also introduced several new terms, including one which was to be of significant advantage to Mr Green, namely a probationary period. The letter provided: 'The period of the consultancy is 6 calender (sic) months - commencing 23/6/94. Between 23/6/94 and 23/7/94 an evaluating period will occur. On the 23/7/94 after the evaluating period has been deemed successful both parties will sign the contract. Charlie will receive all salaries, that were paid to her when she as employed, as a monthly consultancy, paid in arears (sic).' 109 On 25 July 1994 Ms Brown was handed a letter, prepared by Mr Green's solicitor, Mr Frumar, which informed her of her dismissal but gave no reasons. Schmidt J rejected the evidence of Mr Green and Maryanne Drewe, (Chief Executive Officer of Image at the time) that Ms Brown had not properly performed her work during the period of the consultancy agreement, preferring the evidence of other witnesses. Her Honour found that Ms Brown's dismissal arose out of comments allegedly made by another employee, Ms Ogilvie, to Mr Green and Ms Drewe, who apparently questioned Ms Brown's work and loyalty to Image. Ms Ogilvie did not give evidence, and Mr Green conceded in cross-examination that she did not provide any details of her allegations other than her personal perceptions. Mr Green also conceded that he had no basis for his own fears that Ms Brown was "trading secrets" with Mr Danny Avidan, Company Director and Chief Executive Officer of Discovery Clothing Company Pty Limited ('Discovery') with whom Ms Brown had formed a romantic attachment and whom she later married.

110 Schmidt J found that: 131 … Mr Green accepted he had never put to Ms Brown matters such as that she had assisted Discovery, had damaged Image or the partnership or that others had been performing her work. 111 Further, her Honour found that: 132 …that there was no proper or fair basis for Mr Green having terminated Ms Brown's employment in July 1994. The termination was without notice and without payment in lieu of notice, in accordance with the express provisions of the consultancy arrangement devised by Mr Green.

112 Image also failed to pay, without any proper or lawful basis, outstanding annual leave on termination, even after Ms Brown pursued this.

113 Her Honour found that this conduct and the contract that permitted the termination of Ms Brown's employment were unfair within the meaning of s 275 of the 1991 Act.

114 Her Honour ruled that a period of 12 months' notice would have been a fair basis for termination of the employment, based on: 134 …the circumstances of this employment, the nature of the employment, its seniority, the way in which it had developed over time, Ms Brown's remuneration package (which included commission on profits), the fact that Image continued to obtain the benefits of Ms Brown's work, after the summary termination of her employment to its profit and without proper recompense to her, and the circumstances of the establishment of the consulting arrangement and its termination … 115 In relation to alleged later misconduct by Ms Brown Schmidt J concluded that: 136 I am unable to conclude that any of the 'information' later discovered by Image as to Ms Brown's conduct prior to her resignation, during the period of the consultancy or after her dismissal, amounts to misconduct which would warrant the Court concluding that the consultancy contract was not unfair or that no discretion to make monetary orders as to this aspect of the claim should be made in favour of the applicants. 116 After reviewing the evidence her Honour rejected the appellants' claim that Ms Brown had committed serious misconduct by having worked on Discovery's 'Lili' label whilst employed by Image and thereby breached a duty of fidelity to Image.

117 It was also alleged by the appellants that Ms Brown had worked on her own label during the period of the consultancy. Her Honour appears to have accepted that Ms Brown did not perform any work on her own label whilst employed by Image, noting that this was consistent with other evidence and that it was difficult to imagine that Ms Brown would have any time to work on her own label. Her Honour also noted that Mr Green had already rejected the idea of Image developing a 'Charlie Brown' label and that Image did not have, nor did it seek, any restraint from competition with Ms Brown after her termination.

118 There was an issue as to whether Ms Brown disclosed information confidential to Image. As to this matter her Honour found that Ms Brown had disclosed such information to a large number of potential backers of her own proposed business, including Mr Avidan. However, her Honour considered that: 149 …there was no evidence that Ms Brown's recollection of Image's confidential information had the result that Image suffered any particular damage and that Howard Showers' gross sales information had been released in the past to the public by Ms Brown in public interviews in the press when being promoted by Image as the face behind Howard Showers, without complaint by Image. Such information was obviously not confidential. 119 On the issue of confidential information Schmidt J concluded: 151 … that the real measure of the use to which any confidential information was wrongly put and the damage Image thereby suffered, was the failure of Ms Brown to attract a backer for her own label.

120 Ms Brown's attempts to establish her own venture failed in October 1994, and she then accepted employment with Discovery, assisting on the 'Lili' label and producing a new 'Charlie Brown' label. Ms Brown earned less than she had earned at Image. Her Honour found that the 'Charlie Brown' label developed at Discovery may have competed with 'Howard Showers', but by then Ms Brown was free to compete with her former employer.

121 The appellants conceded that in order to make out their case that Image was entitled to summarily terminate the consultancy agreement with Ms Brown on 25 July 1994, it had to be established that Ms Brown had engaged in misconduct which was either known at the time of the dismissal or which was subsequently discovered: see, for example, Concut Pty Limited v Worrell (2000) 176 ALR 693 at 707 per Kirby J. It was contended that the case for summary termination was made out because: (a) Ms Brown owed a fiduciary duty to Image and breached that duty by working on the 'Lili' label for Discovery whilst employed by Image and worked on the development of her own label in June or July 1994 whilst still employed by Image. Even though Ms Brown may not have profited from her work that is irrelevant to a consideration of whether she breached her fiduciary duty. (b) Even if the Commission was of the view that the actions of Ms Brown did not constitute a breach of her fiduciary duty to Image, her actions constituted matter that that entitled Image to lose its trust and confidence in her as an employee: see Day v Lumley Life Ltd (1999) 90 IR 70. 122 It is not entirely clear from her Honour's judgment what view she took about the nature of the separation between Image and Ms Brown when Ms Brown said on 22 July 1994, "This is the last straw, I'm out of here". Her Honour observed that whilst the language used by Ms Brown "did not necessarily reflect an intention to leave her employment with Image", the parties all acted on the basis that she had resigned. It appears that her Honour also acted on the basis that Ms Brown resigned, although that has to be seen in the context of her Honour's approach that the contract of employment and the partnership agreement "formed one overall arrangement between the two individuals, their two companies and Image."

123 Whether or not it was the case in a legal sense that Ms Brown resigned from her employment with Image, the separation has to be seen in the light of the fact that there was no break in the continuity of Ms Brown's employment. Ms Brown returned to work on the following Monday 24 July 1994 to perform the same work she had previously been doing at the same rate of salary; she returned the holiday pay that had been paid to her "on termination", she apologised to Mr Green for her outburst; Mr Green willingly took her back, albeit conditionally. In any assessment of what might be a reasonable period of notice of termination of the consultancy agreement, Schmidt J would not, in our opinion, have been confined to a consideration based on Ms Brown having only commenced employment with Image on 24 July 1994 but would have been entitled to take into account the fact that Ms Brown had been employed by Image since 1987.

124 Schmidt J found on the evidence that at the time Mr Green dismissed Ms Brown he had no proper basis for doing so including that he had no concrete basis for fearing that Ms Brown was 'trading secrets' with Mr Avidan. Further, that Mr Green never put to Ms Brown matters such as that she had assisted Discovery, had damaged Image or the partnership, or that other employees had been performing the work she was required to do for Image. We can see no error in this assessment of the evidence by her Honour. 125 The appellants contended that after Ms Brown's summary dismissal it was discovered that she had been working on Discovery's 'Lili' label since at least February 1994 and that this constituted a breach of her fiduciary duty to Image. The appellants contended that it was not necessary for Ms Brown to have profited from her dealings with Discovery in order to breach her fiduciary duty to Image. It was sufficient that she worked on the 'Lili' label. In this connection Schmidt J found that:

· Image and Discovery were not in competition with each other prior to the termination of Ms Brown's employment. · Ms Brown did have contact with Mr Avidan and Discovery's 'Lili' designer and offered advice to the designer but she had not been consulting for Discovery since February 1994 on the 'Lili' label. 126 Her Honour's findings were clearly open to her on the evidence. The appellants submitted that whilst Discovery may not have been a competitor of Image at the time, it was always a potential competitor and any advice or information passed on by Ms Brown had the potential to be detrimental to Image. The fact that Ms Brown may have offered advice to Lili's designer was merely incidental to her personal relationship with Mr Avidan and was not calculated or likely to cause harm or detriment to Image. We discern no error in this respect.

127 The appellants further contended that Ms Brown was working on the development of her own label in June/July 1994 whilst employed by Image. In this respect Schmidt J found:

· By the time Ms Brown began to develop her own label and business plan she had "in reality produced all of the work required of her by Image…" · Ms Brown was forced to consider what she would do in the event that the consultancy was terminated by Image at the end of the six months' consultancy and the taking of such steps could not found a proper basis for a finding of misconduct warranting summary dismissal. 128 The appellants submitted that Ms Brown's actions, in developing her own label whilst still employed by Image and in the context of the partnership agreement with Mr Green, constituted a breach of her fiduciary duty. We do not agree. Neither Image nor Mr Green suffered any detriment from Ms Brown's actions in developing her own label and we do not consider that she abused her position as a fiduciary. We agree with Schmidt J that it is perfectly understandable and acceptable that Ms Brown would make contingency plans in the event that she was no longer employed after the expiration of the consultancy agreement in circumstances where she had fulfilled her obligations to Image in respect of her work obligations.

129 The applicants submitted that even if Ms Brown did not breach her fiduciary duty, at the very least her actions constituted matters that entitled Image to lose its trust and confidence in her as an employee: Day v Lumley Life Ltd (1999) 90 IR 70. In that case Hungerford J said at 71-72: The employment relationship, I have to say, is a serious relationship with important incidents for both parties to it. It is a consensual relationship based on contract and with respective rights and obligations. It should not, I think, operate, or to be so seen, in practice in a way which permits one party, here the employer, to act in a one-sided manner contrary to the legitimate expectations and understandings of the other party, here the employee, and particularly where such action damages or detrimentally affects the career interests of the employee. Employees have a corresponding duty to act with fidelity and good faith. The position was stated by Kilner Brown J. presiding in Robinson v. Crompton Parkinson Ltd. ([1978] I.R.L.R. 61 at 62) in this way: It seems to us, although there is no direct authority to which we have been referred, that the law is perfectly plain and needs to be re-stated so that there shall be no opportunity for confusion in the future. In a contract of employment, and in conditions of employment, there has to be mutual trust and confidence between master and servant. Although most of the reported cases deal with the master seeking remedy against a servant or former servant for acting in breach of confidence or in breach of trust, that action can only be upon the basis that trust and confidence is mutual. Consequently where a man says of his employer, 'I claim that you have broken your contract because you have clearly shown you have no confidence in me, and you have behaved in a way which is contrary to that mutual trust which ought to exist between master and servant,' he is entitled in those circumstances, it seems to us, to say that there is conduct which amounts to a repudiation of the contract. In Bliss v. South East Thames Regional Health Authority ([1987] I.C.R. 700) the Court of Appeal (U.K.) commented as to the implied term of mutual confidence and trust in an employment contract as follows (at 714): It is common ground on the pleadings that it was an implied term of the plaintiff's contract that the authority would not without reasonable cause conduct itself in a manner likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee. There is ample authority in employment cases to warrant the implication of such a term. The relationship, as I have said, between the employer and an employee is of a serious nature. Its importance in presently relevant respects may be illustrated by what the Employment Appeal Tribunal ( Browne-Wilkinson J. presiding) said in Woods v. W. M. Car Services (Peterborough) Ltd. ([1981] I.C.R. 666 at 670-672): In our view it is clearly established that there is implied in a contract of employment a term that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: Courtaulds Northern Textiles Ltd. v. Andrew [1979] I.R.L.R. 84. To constitute a breach of this implied term it is not necessary to show that the employer intended any repudiation of the contract: the tribunal's function is to look at the employer's conduct as a whole and determine whether it is such that its effect, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it: see British Aircraft Corporation Ltd. v. Austin [1978] I.R.L.R. 332 and Post Office v. Roberts [1980] I.R.L.R. 347. The conduct of the parties has to be looked at as a whole and its cumulative impact assessed: Post Office v. Roberts. We regard this implied term as one of great importance in good industrial relations. … … … In our view, an employer who persistently attempts to vary an employee's conditions of service (whether contractual or not) with a view to getting rid of the employee or varying the employee's terms of service does act in a manner calculated or likely to destroy the relationship of confidence and trust between employer and employee. Such an employer has therefore breached the implied term. Any breach of that implied term is a fundamental breach amounting to a repudiation since it necessarily goes to the root of the contract: see Courtaulds Northern Textiles Ltd. v. Andrew [1979] I.R.L.R. 84. 130 We do not consider that Ms Brown's conduct during June/July 1994 was "calculated or likely to destroy the relationship of confidence and trust" between herself and her employer or that her conduct amounted to a repudiation of her contract with Image. Such a submission is unsustainable, particularly given that there was no evidence of Ms Brown 'trading secrets' with Mr Avidan, that Image suffered no detriment, that Discovery was not a competitor of Image at the relevant time, and that Ms Brown had fulfilled her obligations to Image in terms of her work obligations when she began developing her own label as a contingency against the prospect of termination at the end of the six months' consultancy agreement.

131 The appellants submitted that because of Ms Brown's misuse of Image's confidential information she was deprived of any claim to "clean hands" and any claim to the benefit of the Court's discretion. The appellants referred to Coco v A N Clark (Engineers) Ltd (1969) RPC 41 where Megarry J at 47 cited the three elements normally required if a case of breach of confidence is to succeed: i) The information itself must have the necessary quality of confidence about it; ii) That information must have been imparted in circumstances importing an obligation of confidence; and iii) There must be an unauthorised use of that information to the detriment of the party communicating it. We note the element of "detriment", a matter to which we will return.

132 The appellants also referred to Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd (1967) VR 37 at 40 where Gowans J said: …a distinction has to be maintained between information and knowledge acquired in confidence by an employee during his employment which he uses or discloses for his own advantage while he is still an employee, and information and knowledge so acquired which he uses for his own advantage after his employment is finished. A further distinction has to be drawn between information which forms part of the employee's stock of general knowledge, skill and experience, and that which should fairly be regarded as a separate part of the employee's stock of knowledge (whether it is identifiable as "particular" or "detailed" or "special") which a man of ordinary intelligence and honesty would regard as the property of the former employer.

133 Ansell Rubber was concerned with two employees who had been employed by the plaintiff and who, whilst so employed, had used confidential information obtained from the plaintiff to design, construct and operate machines to make products in direct competition with the plaintiff to the plaintiff's detriment. That case may be distinguished from the present because (a) there was no evidence that Image suffered any detriment, and; (b) the defendants did not merely make use of their own recollections and their personal knowledge, skill and experience but actively set about, in secret, to acquire "information of a special or particular nature belonging to the plaintiff" to use for their own profit to the detriment of the plaintiff.

134 The appellants contended that: The real issue is whether Ms Brown misused that confidential information ("sales accounts, style sheets, client lists, the levels of gross profit and all other aspects of Image's business") contrary to her obligations to Image. On any view of the findings of the learned Trial Judge, it is clear that Ms Brown did misuse confidential information by disclosing it to a large number of potential backers for her new venture, including Mr Avidan … This finding of fact is not contested by the Respondents in this appeal. There is simply no basis at law which supports the view of the Learned Trial Judge that because Ms Brown did not benefit from the misuse of the confidential information, that this somehow alters the misconduct by Ms Brown. 135 It is clear that Schmidt J was concerned about this issue of the use of confidential information by Ms Brown and gave particular attention to the issue. At par [151] of her judgment of 7 June 2000 her Honour said: I have weighed this aspect of the case of the respondents most carefully, particularly having in mind the matters which I have concluded have been made out against them. Having done so, I have concluded that the real measure of the use to which any confidential information was wrongly put and the damage Image thereby suffered, was the failure of Ms Brown to attract a backer for her own label. 136 Schmidt J also had regard to the fact that:

· Image did not suffer any particular damage from Ms Brown's use of the confidential information. · Howard Showers gross sales information had been released in the past to the public by Ms Brown without complaint by Image. · The business plan was developed from calculations made by Ms Brown's accountant based on Ms Brown's recollection of Howard Showers' average sales price and sales volumes, not Image's business records and documents which she did not have access to. · The plan and projections also had regard to Ms Brown's own knowledge of the market and her contacts within the industry. 137 We also observe that the confidential information of which the appellants complain, and which was used by Ms Brown to develop her business plan to launch her own label was collected during her period of employment with Image. However, in constituting elements of her business plan, the confidential information was not released to potential backers until after Ms Brown's employment had been terminated. There were no express post-employment restraints on Ms Brown prohibiting the use of confidential information that she had acquired whilst employed with Image.

138 In considering whether Ms Brown's use of the confidential information militates against any finding of unfairness on the part of Image and Mr Green in relation to the termination of the consultancy agreement, we have come to the view that it does not. We consider that, overwhelmingly, the conduct of the appellants in taking advantage of the opportunity of Ms Brown's "resignation" by leaving her with little choice but to enter into a consultancy agreement for six months with a one month probationary provision and then dismissing Ms Brown on the basis of no more than a feeling that she could not be trusted, was singularly unfair. The fact that the appellants relied on information gathered after the termination to justify the summary dismissal of Ms Brown was, we consider, an ex post facto justification that does not withstand proper scrutiny. 139 In relation to the probation period of one month, what possible justification there could have been to place Ms Brown on probation after she had been with Image for seven years, made such a significant contribution to the business and "resigned" in a fit of pique - provoked by Mr Green - escapes us and we take the view that such a provision added to the unfairness of the consultancy agreement.

140 The appellants attacked the decision of Schmidt J to vary the consultancy agreement to make it a fixed term contract only terminable by the employer giving 12 months' notice or pay in lieu of notice, with associated benefits. The main points of their submission in this respect were:

· The consultancy agreement was for a period of six months with a provision that it could be terminated after a one-month evaluation period. This occurred because Mr Green had bona fide concerns about Ms Brown and had an honest belief held on reasonable grounds that it was in the best interests of Image to terminate the consultancy agreement. · Ms Brown had been employed by Image pursuant to the consultancy agreement for less than two months. This is the relevant employment period for the Court to examine given that Ms Brown had previously resigned. · Ms Brown had freely entered into the consultancy agreement, which was only for a six months period. · Ms Brown found employment shortly after the termination of her employment. · A period of 12 months' notice of termination of the consultancy agreement would not have been a bargain that the parties would have struck between them and therefore the Court should not construct an outcome that the parties would not have achieved themselves. · The Court should go no further than is necessary to prevent unconscionable conduct. · The appropriate notice period to terminate the consultancy agreement, if it were found unfair, should be no more than two months. 141 We disagree with the appellants' contention about the narrow scope within which the termination of the consultancy agreement should be considered. As we said earlier, it was open to Schmidt J to have regard to the fact that Ms Brown had been employed by Image since 1987 and in all the circumstances we consider that it would only be proper for the whole of the period of Ms Brown's employment with Image to be taken into account in determining a reasonable notice period.

142 There is, of course, no fixed scale or benchmark whereby it may be determined in any mechanical way what might be an appropriate period of notice where unfairness had been found to affect a contract or arrangement pursuant to s 275 of the 1991 Act. In this regard, in Baker v National Distribution Services Limited (1993) 50 IR 254 the Full Court of the Industrial Court of New South Wales (Fisher CJ, Hill and Hungerford JJ), in discussing the relevance of general industrial standards when considering the question of fairness under s 275 of the 1991 Act, said at 270: In other words, s.275 occupies a most special role in the scheme of the Act by enabling the Court, in relation to transactions within its scope, to grant relief inter partes according to ordinary standards of fairness but nevertheless by directing attention to the particular circumstances of the individual contract or arrangement concerned. 143 We have examined closely the relevant factual material before her Honour and the basis upon which her Honour arrived at the conclusion to provide for 12 months' notice. This is set out at par [134] of her judgment as follows: 134 In the circumstances of this employment, the nature of the employment, its seniority, the way in which it had developed over time, Ms Brown's remuneration package (which included commission on profits), the fact that Image continued to obtain the benefits of Ms Brown's work, after the summary termination of her employment to its profit and without proper recompense to her, and the circumstances of the establishment of the consulting arrangement and its termination which I have outlined, I conclude that a period of 12 months' notice would have been a fair basis of termination of this employment. The contract should be varied to so provide. 144 It was open to her Honour to arrive at the conclusions she did in respect of notice and we do not consider there was any appellable error.

145 The appellants contended that the trial judge failed to properly apply the common law principle of mitigation. The appellants submitted that: [T]he principle of mitigation usually requires any compensation awarded for the dismissed employee to be reduced to the extent of the employee's post-employment earnings which coincides with the appropriate period of notice or, the amount the employee should have received if the employee acted reasonably in seeking alternative employment: see Lucy v The Commonwealth (1923) 33 CLR 229 at 249. 146 It was submitted by the appellants that Schmidt J ought to have deducted from the notice period monies, amounts earned by Ms Brown during the notice period. Further, that the apparent difficulty in calculating the amount was not an excuse for its non-application.

147 In summarising its conclusions in relation to the principles to be applied in the making of money orders under s 106(5) of the Act, the Full Bench in Westfield Holdings v Adams said at par [161]: …

5. It follows that in making an appropriate monetary order under s 106(5) it is proper to have regard to the common law principles relating to mitigation but recognising that in particular cases it will be inappropriate to apply mitigation. Ordinarily, where an employee has been successful in avoiding his or her loss, or has failed to take reasonable steps to avoid loss in the period following dismissal, the Court, in determining what is just in the circumstances of the case, should give consideration to whether, and to what extent, any money amount in respect of notice of termination that is contemplated to be the subject of an order under s 106(5), should be reduced by monies earned, or imputedly earned, in the relevant post-termination period. We emphasise that the application of the principle of mitigation in cases brought under s 106 represents one aspect of the consideration of what orders are "just in the circumstances of the case". See also the detailed consideration earlier in Westfield , at pars [132] to [146], as to, inter alia , avoided loss. 148 In her judgment at par [156], Schmidt J addressed the question of mitigation as follows: 156 … As to mitigation, applying the approach discussed in Cory to the circumstances of this case, I take the view that it is not appropriate to have regard to Ms Brown's earnings in her later employment by Discovery in calculating monetary orders. If such an approach were to be adopted it would, in my view, also be necessary to give consideration to the sums expended by Ms Brown in seeking to establish her own business. Regard to one aspect without the other would not be to approach the concept of mitigation in circumstances such as these on either a fair or proper basis. 149 After the cessation of Ms Brown's employment with Image she commenced a business venture on her own account. This business venture failed, and resulted in a loss of considerable funds put into the business by Ms Brown. Ms Brown subsequently commenced employment with Discovery in October 1994 and to that extent we consider that Ms Brown mitigated her loss. We do not consider that the circumstances of this case provided a basis to exercise the relevant discretion so as to result in a departure from the usual approach to mitigation for avoided loss. Any monies received by Ms Brown in respect of the 12 months' notice period should have been offset by income she derived from her employment with Discovery.

150 However, we also consider that Schmidt J was correct in stating that consideration should be given to the sums expended by Ms Brown in seeking to establish her own business following her summary dismissal. Thus, for the 12 months' period commencing on and from 26 July 1994 an assessment should be made of what Ms Brown would have earned if her employment had not been summarily terminated. Added to that amount should be the sum expended by Ms Brown in seeking to set up her own business - something she would not otherwise have had to do at the time had she not been summarily dismissed. From the total of these two amounts should then be subtracted Ms Brown's income from her employment with Discovery during the relevant 12 months' period and the resulting amount would become payable to Ms Brown. If, of course, Ms Brown's income from employment with Discovery for the relevant 12 months' period exceeds the total of her imputed income from Image and her business establishment expenses, no amount would be payable to Ms Brown under the relevant head of compensation.

151 We wish to add that the way in which the setting up of a post-employment business should be treated as "mitigation" will depend on the relevant circumstances. The conclusion here has been reached on the basis of the particular circumstances and no general principle is intended to be established.

152 The appellants submitted that Ms Brown received a fair price for her share of the partnership business from the receiver and that it would, therefore, not be appropriate to award her any compensation under s 275(3) in that respect. It was contended that Ms Brown was in no worse position than what she expected to be in at the start of the partnership agreement.

153 Schmidt J dealt with the question of the partnership agreement at pars [157] to [196] of her judgment. At pars [181] and [182] her Honour said: 181 …In cross examination, Ms Brown agreed that she got a fair price for her share of the business at that point. While the respondents relied upon this view, it did not, in my view, detract at all from the strength of the case which the applicants here advanced as to the partnership deed or the unfairness of the respondents' conduct in relation to the partnership, its establishment, operation and dissolution. Ms Brown's satisfaction with the Receiver's conduct who, for instance, as part of his valuation, reinstated into his calculations the 10% discount which had been removed, could be well understood. This cannot, however, be relied upon by the respondents as having fairly redressed the wrongs which they had earlier done the applicants. Nor did it provide a complete answer to the claims advanced here, which were not concerned with the fairness of the Receiver's conduct, but that of the partnership agreement and the conduct of the respondents thereunder. 182 These matters inevitably lead to the conclusion that the applicants have demonstrated the unfairness of the partnership agreement. That agreement was plainly a one-sided document, designed by Mr Green to advantage him and to disadvantage Ms Brown and to ensure that she did not obtain independent advice as to her position. That Mr Green was able to engineer this result obviously flowed from his understanding of Ms Brown's belief that they had a father/daughter relationship and that he would treat her accordingly. That their respective bargaining positions were not equal was plain. The agreement not only permitted Mr Green to conduct himself in a manner which ignored Ms Brown and Charlie Brown's proper entitlements and the basis under which the agreement had been entered, but was designed by Mr Green in order to enable him to achieve that end. It follows that this aspect of the parties' arrangement must also be found to be relevantly unfair, as that term was understood under s275 of the Act. 154 In determining the value of the partnership business for the purpose of making money orders under s 275(3) of the 1991 Act Schmidt J said: 185 I take the view that the calculation of the monetary orders should be approached on the basis that an assessment be made of the value of the partnership business at the time when it came to an end and that there should be some component as to the income sought. I do not, however, accept that it would be appropriate to make orders in respect of an income stream on a basis that the business would have continued to October 1999. … 194 Mr Elliott's valuation proceeded, in part, on the basis of an assumption that the partnership business would have continued with Ms Brown's involvement, selling clothes she had designed, without her designing a Charlie Brown label while working for Discovery. On the evidence in this case, I have reached the conclusion that it would not be just to assume that this relationship would have continued indefinitely after the events of 1994. In that context, I have concluded that it would be just to proceed on the basis that the relationship between Image and the partnership would have come to an end after a proper period of notice. I assess such notice on a basis similar to that which I concluded was fair in relation to the notice of termination of employment which should have been given by Image to Ms Brown. It follows that 12 months' income should flow under the monetary orders to be made. 195 The notice of dissolution was given by Ecroblack on 27 September 1994. I take the view that the monetary order should therefore encompass an income stream, calculated on the basis adopted by Mr Elliott, to the end of September 1995, less any profits paid to Ms Brown prior to that date. I have also taken into account as relevant to this approach that during some of this period at least, Howard Showers' clothes available for sale were in fact designed by Ms Brown before the termination of her employment. 155 In our opinion, there is no basis for interfering with the exercise of her Honour's discretion in relation to the partnership agreement and her valuation of the partnership business. Her Honour was clearly correct in identifying the unfairness perpetrated by the appellants in their conduct aimed at pressuring Ms Brown to leave the partnership following her dismissal from employment in July 1994 and in finding that the partnership agreement was unfair and designed by Mr Green to be so.

156 The cross-appeal is concerned only with the calculation of interest, reflected in order B8. The cross-appellants have challenged her Honour's ruling that no interest should be awarded "during the period in which these proceedings were stayed" (that is, from 6 August 1996 to 2 December 1998). Schmidt J had found that no interest should be ordered during that period as the stay "flowed from the applicants' conduct of the Supreme Court proceedings".

157 The principles to be applied in awarding interest in unfair contract actions were considered by the Full Bench of the Commission in Court Session in Abboud v State of New South Wales (Department of School Education) (No 2) (2000) 99 IR 299. Schmidt J, with whom Wright J, President and Walton J, Vice-President agreed, reviewed the authorities and concluded at 307 that: …the awarding of an interest component is a matter of discretion to be exercised in the particular circumstances of the case in order to discharge the statutory duty, now arising under s106(5), to make a monetary order in connection with the contract varied, 'just in the circumstances of the case'. 158 Consistent with the general approach we have taken in relation to legal costs in the Supreme Court proceedings, we consider that her Honour was correct in not awarding interest for the period of the stay.

159 By notice of motion referred to this Full Bench, the respondents applied for an adjustment to the orders made by Schmidt J under the slip rule. It was contended that there is a clerical error in that the figure of $332,668 was incorrectly included in order B6 made by Schmidt J on 8 September 2000. It was submitted that the figure should read $363,335. This application is neither consented to nor opposed by the appellants.

160 The majority of the High Court in DJL v Central Authority (2000) 201 CLR 226 at 244 noted in relation to the slip rule: The common law courts, as superior courts of record, had "full power to rehear or review a case until judgment [was] drawn up, passed, and entered". That statement, with citation of supporting authority, was made by Starke J in Texas Co (Australasia) Ltd v Federal Commissioner of Taxation [(1940) 63 CLR 382 at 457]. Even after entry of judgment, an error arising from an accidental slip or omission might be corrected at any time by further order in the action and even without an enabling rule of court [ L Shaddock & Associates Pty Ltd v Parramatta City Council (No. 2) (1982) 151 CLR 590 at 594-5]. An order also might be made in the action for the correction of the records of the court to make certain that they truly represented what the court had pronounced or had intended to pronounce [ Ainsworth v Wilding [1896] 1 Ch 673 at 678-9; Ivanhoe Gold Corp Ltd v Symonds (1906) 4 CLR (Pt 1) 642 at 669 … 161 We note also the principles enunciated by McHugh JA in relation to the slip rule in Storey & Keers v Johnstone (1987) 9 NSWLR 446 at 452:

· If the proposed variation of an order relates to a matter which is in issue in the proceedings or to something which was incidental to such a matter, the court, in my opinion, has power to amend its order if the need for the variation is the result of an accidental omission or mistake. 162 There is no issue that a mistake was made in calculating the amount under order B6, that the correct amount is $363,335, or that there is power to correct the error in these proceedings. The error should be corrected. It is convenient that the Full Bench finalise all outstanding issues. In view of the attitude of the parties it is appropriate that we do so. The order will be amended accordingly.

163 We make the following orders: 1. Leave to appeal is granted.

The appeal is upheld to the extent identified in this decision.

The decision and orders of Schmidt J are varied by: (a) Adding a new par B2A to her Honour's orders of 8 September 2000 as follows: 2A Order that a calculation shall be made for the 12 months' period commencing on and from 26 July 1994 as to what Ms Brown would have earned if her employment had not been summarily terminated. To that amount shall be added the sum expended by Ms Brown in seeking to set up her own business. From the total of these two amounts should then be subtracted Ms Brown's income from her employment with Discovery during the relevant 12 months' period and the resulting amount shall become payable to Ms Brown. (b) Deleting orders B3, B4 and B5 of her Honour's orders of 8 September 2000. (c) Deleting the amount $332,668 in order B6 of her Honour's orders of 8 September 2000 and inserting in lieu thereof the amount $363,335. (d) Amending the schedules attached to her Honour's orders of 8 September 2000 to reflect this judgment. (e) Deleting the amount of $283,995.27 in order B8 of her Honour's orders of 8 September 2000 and inserting a new amount as interest on the compensation awarded in accordance with the new calculations carried out pursuant to order 3 (d) hereof.

The parties are to file and serve short minutes of order reflecting this judgment on or before 4.00pm Wednesday 28 August 2002.

The parties have liberty to file short minutes of consent orders in respect of the stay granted of the orders of Schmidt J and, in the absence of agreement, to have the matter listed before a member of the Full Bench for determination.

The appellants shall pay 70 per cent the respondents' costs of the appeal. __________________________________

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